European Parliament rejects Priips disclosure rules

The European Parliament has voted to reject the current regulatory technical standards for the implementation of Priips’ Key Information Document.

The Commission and Council have now been called to discuss and possibly redraft the standards which could consequently delay Priips’ start date expected for December.

The vote follows a recent debate in parliament which called for the redraft of technical standard on the Priips’ KID documents within investment funds, insurance products and derivatives.

The European Parliament’s Economic Monetary and Affairs committee intends to have a revised draft ready for another Parliament vote in October.

European Conservatives and Reformists chairman and London MEP Syed Kamall, who is among the leaders of the objection process, says the vote on a rethink on standards was necessary to avoid high street investors being hurt.

He says: “A cross-party group of MEPs has spent many hours scrutinising and amending this legislation. We are fully behind giving clear and accurate guidance to investors, but we will not accept poor and inaccurate legislation in a rush to get the regulation into force.

“Unless we get this right it is consumers who will suffer. For example, the average high street investor looking to open a new Isa account could be given unclear misinformation because their provider was required to do so by this regulation. The European Commission will now have to go back to the drawing board and come up with something that will actually deliver.”

On 1 September, the Econ committee approved the motion by MEPs calling for changes to current rules on Priips in a bid to deliver greater transparency for retail investors.

The motion for resolution from the Econ committee objects to proposed regulatory technical standards for retail investors set by the European Commission.

There are two main objections to the Commission’s draft rules: the provision of information about past performance of funds in the KID and the question of whether the current proposals put different providers of Priip products on “an unequal footing”.

This is due to the way insurance products are categorised and how transaction costs are calculated. In July, MEPs already objected to the rules as being misleading for investors.

Thomas Richter, chief executive of the German investment funds association BVI says it is “absurd” that the Commission considers that the Priips regulation could enter into force without the complementing technical standards.

He says: “We recommend postponing the application date by another 12 months. This would align the timeline for Priips with the entry into force of the new Mifid regime, which makes sense given the number of overlaps in both frameworks.

“Regulation and standards need to come hand in hand, otherwise there is a risk of diverging implementation at national level. The result would be paradox: instead of a harmonised European-wide provisions for investor information ensuring direct comparability which is the intention of Priips we would achieve exactly the opposite, the uncontrolled growth of national regulation.”